Struggling shopping malls let high schools, doctors move in where Penney’s used to be

Beneath some positive stats, shopping malls are facing serious problems that threaten their health, including a shift to non-retail tenants and forecasted rent declines, according to Wells Fargo analysts.Wells Fargo stresses a need to look deeper at high mall occupancy rates. Occupancy for the fourth quarter of 2016 was 93.6%, near the 93.3% for all of 2015, according to data from the National Council of Real Estate Investment Fiduciaries, cited by the International Council of Shopping Centers. However, the type of tenants many malls have is shifting to a lower-quality occupant for the overall health of the retail-focused mall, the analysts said.“[F]or example, there are far more ‘mom-and-pop’ stores, and some malls have repurposed space for non-retail uses such as doctors offices, town libraries and even a high school,” Wells Fargo said in the report published Sunday. “Mom-and-pop” retail in a mall setting may generally be seen as a more-vulnerable long-term tenant and less of a traffic pusher without big-name brand backing.The annual base rent for malls at the national level was $27.30 per square foot in 2016, up 1.4% from 2015, according to the International Council of Shopping Centers. But that doesn’t take into account the impact of long-term leases.